Thursday, September 13, 9:25 a.m. The main decisions for September in Europe are now known. The most anticipated was the European Central Bank’s decision last Thursday. Its announcement of a plan for unlimited, but conditional, purchases of the bonds of troubled euro-zone countries, created a big one-day rally last Thursday, but little follow-through since. The [...]

Thursday, September 13, 9:25 a.m.

The main decisions for September in Europe are now known.

The most anticipated was the European Central Bank’s decision last Thursday. Its announcement of a plan for unlimited, but conditional, purchases of the bonds of troubled euro-zone countries, created a big one-day rally last Thursday, but little follow-through since.

The plan relieves the fears of a default on its debt by Spain, thus kicking the euro-zone debt crisis down the road again. But it has also become clear that any action that might help the worsening economies of the euro-zone is still some ways off, and the possibility of a global recession developing is becoming the new concern.

Meanwhile, even the first step in Spain’s rescue, that it must first request a rescue from the EU, has become cloudy. Spain refused to request a rescue prior to the ECB decision, saying it couldn’t make a decision until it knew the details of any conditions. Now that it knows the conditions it remains reluctant to take part in the plan, citing the problem of imposing more austerity measures that might worsen its economy, which is already in a serious recession.

And Spain’s Prime Minister Mariano Rajoy is now saying that improved market conditions may make aid unnecessary. "I don’t know if Spain needs to ask for it", he said in a parliamentary debate yesterday, "I am prepared to reduce our budget deficits, but others are not going to decide for us how they will be reduced."

Meanwhile, in further evidence that the euro-zone crisis is only being kicked down the road again, yesterday European Union officials said that the decision to grant Greece the already delayed next tranche of $39.7 billion in its latest bailout, may be delayed again, this time until November. The reason for the new delay is that the Troika’s mission of experts in Greece to inspect Greece’s progress toward meeting the Troika’s austerity requirements "is running behind schedule".

In Europe, the next scheduled event was yesterday’s ruling by Germany’s top court on the legality of Europe’s $643.7 billion permanent rescue fund, the European Stability Mechanism (ESM). It was widely expected that the court would not rule against the rescue fund, and it did not, saying only that the measure must be capped to conform to Germany’s constitution.

This week the focus had already changed to the next big event in the U.S., the Fed’s decision on another round of easing at its FOMC meeting today.

Last Friday’s U.S. employment report for August was a big disappointment for the economy, showing only 96,000 jobs created. It completely reversed the previous consensus opinion that the Fed would not take action, to another round of QE3 being almost a sure thing to come out of the meeting.

It’s highly unlikely that with expectations so high, and already factored into markets, that the Fed would dare to disappoint.

As the Bank of Tokyo-Mitsubishi said in a client note yesterday, "The market is rallying on hopes for QE3 even as investors believe QE3 will have virtually no effect. The market does not seem to know what it wants, but the Fed is going to give it to them anyway."

Dollar Sell-off Still Supporting Gold Rally – But.

Our sell signal on the dollar, which supported our buy signal for gold, subsequently saw the dollar drop below its 30-week m.a. for the first time since mid-2011.

But it is another area that will also probably depend on the Fed’s decision today.

Will QE3 weaken the dollar even further, which was the goal of QE2 in 2011, to help U.S. exports? ‘Operation twist’ last year however, did not have that type of effect on the dollar.

We’ll just continue to follow our indicators.

Subscribers to Street Smart Report: A hotline and an in-depth U.S. Markets update report from last evening is in the subscribers’ area of the Street Smart Report website.

A fractionally positive day, the second straight positive day, again with low volatility, the Dow trading in a total range of just 56 points between its intraday high and intraday low. Trading volume was again 0.6 billion shares on NYSE, picked up some in recent days from the 0.4 to 0.5 billion of August.

The Dow closed up 10 points, or less than 0.1%. The S&P 500 closed up 0.2%. The NYSE Composite closed up 0.2%. The Nasdaq closed up 0.3%. The Nasdaq 100 closed up 0.2%. The Russell 2000 closed up 0.4%. The DJ Transportation Avg. closed up 0.8%. The DJ Utilities Avg closed down 0.4%.

Gold closed unchanged at $1,734 an ounce.

Oil closed down $.21 a barrel at $97.01 a barrel.

The U.S. dollar etf UUP closed down 0.1%.

The U.S. Treasury bond etf TLT closed down 1.3%.

Yesterday in European Markets.

European markets were mixed yesterday, still hardly any follow-through to their big rally of last Thursday. The London FTSE closed down 0.2%. The German DAX closed up 0.5%. And France’s CAC closed up 0.2%.

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European markets are mostly down again this morning. The London FTSE is up 0.2%. The German DAX is down 0.3%. France’s CAC is down 1.1%. Spain is down 1.2%.

Oil is up $1.29 barrel at $98.30

Gold is up $1 an ounce at $1,735.

This Morning in the U.S. Market:

This week is an average week for potential market-moving economic reports, with most crowded into Thursday and Friday. The reports include the U.S. Trade Deficit, Producer Price Index, Retail Sales, Industrial Production, and Consumer Sentiment.

But the major events of the week will be the Fed’s FOMC meeting, and its decision to be announced at 12:30 pm Thursday, and Chairman Bernanke’s Press Conference that follows at 2:15 pm.

There were no reports in the U.S. Monday, but Japan revised its 2nd quarter GDP down from the previous report by 50%, from 1.4% year-over-year growth to only 0.7%.

Tuesday’s reports were that the NFIB Small Business Optimism Index was up 1.7 points at 92.9 in August, its first improvement in 3 months, and the U.S. Trade Deficit widened slightly, by 0.2% to $42.0 billion in July.

There were no reports yesterday.

This morning’s reports are that new weekly unemployment claims were up 15,000 last week to 382,000. The four-week moving average rose by 3,250 to 375,000. And the Producer Price Index jumped by 1.7% in August,. primarily due to higher fuel costs, which surged 6.4%. The core rate, with the cost of food and energy removed, rose by a more begin 0.2%. Over the past 12 months overall PPI rose 2.0%, and the core rate 2.5%.

Still to come is the important report for the day, the Fed’s decision on providing QE3.

The pre-open indicators have been fractionally positive as they await the Fed decision.

Our Pre-Open Indicators:

Our pre-open indicators are pointing to the Dow being up 20 points or so in the early going, but the day will be decided by the Fed decision, and the market’s reaction to it.

Subscribers to Street Smart Report: There is a hotline and an in-depth U.S. Markets Update from last evening in the subscribers’ area of theStreet Smart Report website.

I’ll be back with the next regular blog post on Saturday morning, as usual later than on the week-days, probably around 11 a.m. (eastern time).

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